dollar reserves

Brad W. Setser, CFR’s fellow for geoeconomics and an expert on currencies, outlines the factors leading to the precipitous recent fall in the valuation of the U.S. dollar. Setser says expectations that the U.S. Federal Reserve will make further rate cuts have added to the dollar’s decline, and says more generally that some countries with large dollar reserves are becoming less comfortable sitting on these reserves. He says the Fed shouldn’t attempt to use interest rates to sway currency exchange rates, but should focus instead on guaranteeing domestic economic stability, adding that it would take a “rather extraordinary series of events” to create a situation in which the United States ought to intervene directly in currency markets by coordinating the sale of euros or yen and buying dollars.